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In A Data-Driven World, Relationships Trump All

“The art of good business is being a good middleman. Putting people together.” – Layer Cake, 2004 film

I’ve always loved that line because it’s about building relationships. A few weeks back I was at a high school entrepreneurship competition. The judges were VCs and at the end one of them said to the students and audience, “the most important thing in business is margins.” Now that is something I expect from a first year university professor, not an experienced VC. Margins can be optimized later, but never sleep on developing relationships.

Have a relationship with your customers, not your metrics

In the high growth start-up world, you are always chasing the next set of numbers that will make you look big in front of a VC. You raise a little bit of money, execute on some things, get some traction, raise more money, and do it again. You never take time to develop a long term relationship with anyone, because anything that takes time does not look good to a VC. This can hurt your business in the long run.

A Ferrazzi Greenlight study of 16 global account teams revealed that relationship focused teams grew their accounts twice as fast as transactional focused teams. Therefore the theory that it’s a “numbers game” is only partially true. We launched Storypanda as a mobile publishing platform in spring 2012. Immediately I started talking to big content partners and none were interested. I came to learn that traction, top value propositions, business cases, were just a part of the bigger relationship picture. They wanted to do business with people they know and like.

So I started working on the relationship. I would send updates every couple of months to let them know of new successes. We had our consumer oriented email newsletters, but every so often I did a partner related one which spoke to their needs. I would even do some different things like sending a post-card. No one does that stuff anymore so it would alway leave an impression. A year later, the content partners knew a lot more about us and we started putting the deals together.

You never know who can lead to who

“If you’re focused on the friendship as its own reward, serendipitous stuff just happens.” Tony Hsieh, CEO Zappos.

Tony Hsieh told a story about his partner setting a dinner with an insignificant vendor, which he was initially reluctant to attend. A couple month later that person became VP at a major vendor Zappos always wanted to do business with.

Two bad ways to develop relationships is mass collecting cards at events and running up your LinkedInLinkedIn connections. What do all those names mean if there is no weight behind it? When I attend conferences I focus on few people from which I want there to be a personal connection. You should be able to make some connection with anyone, be it sports, hobbies, kids, food. And this doesn’t have to be entirely with people in your industry, I often get to know those that offer little “business” value but were great people to get to know. It’s not until we’ve communicated three or four times that I add them to my LinkedIn.

Recently, an investor was suggested to me whom I had no connection with. Fast forward two weeks and I am meeting with them. This happened because I touched base with someone I met two years earlier at a conference who was doing something completely different from me. Over that time I kept in contact every so often if something triggered a thought about them. He ended up introducing me to someone else who led me to the target investor.

Because we use technology, doesn’t mean we are robots

My peers and I often joke that an early stage VC wants a business where the production cost and customer acquisition cost is zero, the market potential is limitless, and everything is hands off. This may work for some businesses like GoogleGoogle Ads, but very few offer such superior value that they can get away with us thinking that there are robots on the other end.

At Storypanda, we work with the most talented and upcoming authors/illustrators in the world. A VC asked me “why you guys” and he kept looking for an answer that was technology focused. We said to him, “when authors talk to us they are speaking with people who care and understand their needs. They like that.” We communicate this message through every medium. People have real emotions and want connections, they don’t want to go to an empty site, upload files, and receive an email that their order is ready.

Even though I can get an author signed up through emails and online tools, it’s important that we get to know them. That is why I speak with every single one before they have signed up. Sometimes it may only be for 5 minutes, but I always end up learning something about them. In addition, we want to show our authors that we are different from the old model and they can reach me at any time. They all have my personal number. And if it means doing early morning calls to Australia or Italy, it’s all worth it.

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